What Would You Do: Is The IRS Going To “Bust” My Salon?
WWYD: I’m Worried My Salon Will Get Busted By The IRS
Even in the community atmosphere of a salon—where everyone knows everything—discussing money and finances is still considered a faux pas. So what do you do when the salon you work at has a community tip book? A member from the BTC Community asked that very question and couldn’t help but wonder, “What happens if my salon gets audited?” Check out her situation below:
“I’m concerned for the salon I work at because I’ve noticed other stylists may not be recording all their tips. At our salon, all stylists record their tips in a ‘community’ notebook of sorts so as to allow the owner to record the tips as part of the employees’ income. But is it true the IRS kind of knows amounts based on the amount of stylists? Listen, I definitely believe in people minding their own business but I’m worried about the place I work. Can a salon get in trouble for a stylist lying about their tips on a daily basis when it comes to filing taxes?”
Keep scrolling to see what other hairstylists had to say!
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“According to my CPA, who is amazing, a hairstylist who does not report any cash or tips is a red flag. It would absolutely increase your chances of getting audited. But, if your salon owner is the one filing taxes and you’re getting taxes deducted from your check weekly, THEY would be getting audited as a business—not you as an employee of said business. On the other hand, if you’re the one responsible for preparing your taxes and reporting your tips, YOU would get audited and possibly the business as well. Business is my strong suit in this industry. Whoever submitted the question, feel free to DM me for private help ☺️.” – @jessiedillon_
“Read the law for yourself. Never assume an owner has his/her stylists’ best interest at heart. If you’re talking about AB5, cosmetologists are exempt from this law. If you’re independent, get incorporated. It allows you to claim more things that you can’t under 1099.” – @jhan33
“Check up on the current laws in your state. I wouldn’t want an underhanded or sloppy businessperson compromising my job either. If it looks like this is happening in your salon, I would look for a new one!” – Heather Sung
Claiming It All Can Help You Get It All
“I claim all of my tips: cash, credit card, Venmo, ALL OF IT. Why? Because I want to be able to show my income accurately when it’s time to get a loan for purchasing a house, a car, etc. Tips are real money and usually thousands each year. This also helps me track my income accurately. As for your salon, if they do not count your income correctly in their taxes (including tips) and you do, yes there is a paper trail and the IRS could ask them why you show one thing and they show another. I think it’s probably unlikely the IRS would catch that though. They only investigate a small percentage of taxes. Lying on your own taxes doesn’t protect your salon from getting audited or being charged with tax fraud, but it puts you in a potentially vulnerable position as well.” – @lindseyreesehairco
“I claim my tips! I want to retire and social security and retirement are based on income. Also, I want our industry to be looked upon as a profession! It’s because of stylists choosing not to record their true income that states want to regulate our industry. I choose to make the ethical decision to claim my cash, and I highly recommend young stylists start off on the right foot.” – @lisaf918
“Just be honest! That’s all you can do! Coming from a family of accountants, it’s important to be honest about what you are making. If the IRS feels like something is off, they will indeed investigate and figure it out. You don’t want to get in trouble for something like that! Don’t worry about your other co-workers, just make sure you are covered 😀.” – @southernsunflowermaddie
“Yes, you can get in trouble for not reporting 100 percent of your tips. The salon can also get in trouble in addition to the stylist. What stylists need to understand is that your tips are INCOME. Do it right and you won’t have a problem. Also, it adds to your gross income, meaning when you apply for a loan it helps.” – Jenn Giacoumis Padden
Remember The Golden Rule: Mind Your Business
“The salon is not your responsibility—your individual income is your responsibility. Keep track of your own responsibilities and leave others off your plate.” – @shyannelee319
“First off, worry about yourself. Your taxes and tips are your business. Their taxes and tips are their business. As long as you are doing what you are supposed to then don’t worry. Also, I would probably consider leaving that salon. Your tips are none of the owner’s business. I really don’t think the IRS is going to ‘burst’ into anyone’s salon.” – Abby Ruth
“I would be more worried about that tip book everyone can peep.” – @hilaryanne1580
“That’s just weird. No one needs to keep track of my tips but ME!” – @jennwish24
“I’ve never heard of such a thing…Is this a booth rental salon? If so, it’s none of your business! I’d consider leaving.” – Sarah Scott
“Mind your business 👀 and don’t be a snitch.” – @pikachu_392
Ready to file your taxes? Read this first!